TaxTMI 
TaxTMI 
2012 (11) TMI 752
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....gement consultancy etc. and had declared an income from interest and other accounting for expenses declared net profit of Rs. 2,61,208/-. In view of the fact that the assessee had raised capital to the tune of Rs. 1.40 crores, the AO required the assessee to file the details in respect of the capital funds introduced in the year under consideration. Considering the details of the following transaction: Tashi Contractors P. Ltd. - Rs. 20,00,000 Madan Electronics P. Ltd. - Rs. 1,00,000 The AO held that from the details and confirmations and other supporting evidences furnished by the assessee. The assessee had raised funds from entities who were in fact 'accommodation entry operators'. The AO was of the view that the entry providers in their statement recorded on oath had admitted that their concern carried on no other activity besides that of providing accommodation entries and they also had given the details of the modus operandi involved and the list of all such companies as well as transactions. The AO further held that the entry giving company Tashi Contractors P. Ltd. has been established to belong to the Mukesh Gupta group of entry providers and as per admission of Sh....
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....ssue of cheques in lieu of cash payments made by the beneficiaries, mere furnishing of confirmatory statements etc. would not legitimatize the transaction. In the instant case, in the bank account of M/s Madan Electronics, there is also corroborative evidence in the form of cash deposits immediately before issue of cheques. In view of this, it is held that the amounts received from these companies are in the form of accommodation entries and shall be treated as unexplained cash credit u/s 68 of the I.T. Act." 3. In appeal before the CIT(A) the assessee made various submissions which are found recorded at pages 5 & 6 of the impugned order. A perusal of the same shows that it was contended that the AO has concluded that these were accommodation entries based on statement on oath of Mr. Mukesh Gupta & Mr. Mahesh Garg which were not confronted to the assessee nor informed to the assessee. The assessee had filed confirmation letters along with the bank accounts of these companies which had not been assailed and the opportunity to cross examine the so called entry operators was not made available. It was also contended that in case the AO disbelieved that M/s Tashi Contractors P. Ltd.....
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....as to be excluded from consideration. 7.1 It was also his argument that as far as the identity is concerned the assessee has filed Confirmation of Account from the said concerns copies of which are placed at pages 17 & 19; copies of the bank statement which are placed at page 18 & 22. Thus, in terms of the requirements of law is concerned the burden of proof cast upon the assessee is fully discharged. Inviting attention to pages 25 & 28 which contains copies of Form no. 2 which is a return of allotment required to be filed under the Companies Act, 1956 by the assessee and Form no. 5 which is notice of increase in share capital/increase in number of members which is also to be duly filed by the assesee under the Companies Act, 1956 have all been filed addressing these aspect. It was his submission that the assessee has duly informed about the factum of allotment of shares to M/s Madan Electronics P. Ltd. equity shares 10,000 in numbers and M/s Tashi Contractors P. ltd. equity shares 2 lakh in numbers, wherein the names and addresses of the said concerns are fully set out. The boards resolution in the case of the assessee, whereby the shares were allotted to these two concerns, it....
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....evidenced from the Return of Allotments in Form No. 2 filed with the Department of Company Affairs further goes to substantiate the identity of the share applicants and genuineness of the transaction in case of the investor. So far as the issue of creditworthiness of the share subscriber company is concerned, the Hon'ble Supreme Court in case of Lovely Export P. Ltd. 216 CTR 195 has held that if the share application money is received by the assessee company from alleged bogus share holders whose names are given to the AO ;then the department is free to proceed in their individual assessment, but it cannot be regarded as undisclosed income of the assessee company. On this issue another decision of Delhi High Court in case of CIT vs. Value Capital Services (307 ITR 334) is also quite relevant wherein the court has inter alia observed that there is additional burden on the revenue in as much as even if the applicant does not have the means for the investment, it must show that the investment made by the applicant actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee." 9.2 It is seen that the CIT(A) further took in....